Who’s Responsible?

Last week's column, "Catch-62 Revisited," which covered the potential adverse effects of failing to make a military service credit deposit, sure hit a nerve. Some readers said agency benefits offices must provide clearer information on the problem. Others declared that employees should take more responsibility for their own situations. And others had specific questions about their retirement. This week, I'll try to address all three of those issues.

The Role of the Agency

An agency benefits specialist should understand the complicated rules of the Civil Service Retirement System and the Federal Employees Retirement System well enough to assist employees in making critical decisions that will affect their retirement benefits. The government should provide adequate training opportunities and career advancement opportunities to keep experienced counselors in the human resources field.

If an employee with military service asks a retirement counselor, "Should I pay my military deposit?" The appropriate answer is "It's up to you." But before saying that, the counselor should:

• Clarify how much creditable military service will potentially be used to compute the CSRS or FERS benefit. To do that, employees have to provide documentation of military active duty that might not be included in their official personnel folder (such as records of service academy time and active duty in reserve components).
• Make sure the employee understands that in most cases, military retirement benefits must be waived in order to count the active duty under CSRS and FERS. There are exceptions, however, when military service can be used to compute both benefits, such as when the employee is receiving retired pay as a member of the reserves.
• Provide instructions on how to request records of military earnings and an accurate computation of the service credit deposit. Employees who don't know how much is owed and how much interest is accruing on the military deposit can end up feeling out of touch with the reality of the situation.
• Prepare two retirement estimates for the employee. To show the impact of not paying a deposit, the employee should receive one estimate of their CSRS or FERS benefit that includes the military service credit and one without it.

Most of the information regarding military service deposits should be provided during the employee's orientation and reintroduced at midcareer. Ideally, by the time the employee has applied for retirement, he or she should clearly understand service credit deposit issues. If it is clear to the benefits specialist that the employee does not understand the impact of the information provided, then additional counseling is in order.

The Employee's Responsibility Employees are responsible for understanding their choices and providing information to their agencies regarding their past military service. Employees also are responsible for documenting their basic pay earned while serving in the military, but the agency can provide assistance in acquiring such documentation. If you don't feel like you understand your choices, ask questions until you do. If you don't think the information you are receiving is accurate, ask for a reference to something available in writing that you might be able to study and interpret easier. The handbook that the Office of Personnel Management has prepared for federal personnel and payroll offices on retirement includes two important chapters on military service:

• Chapter 22, Creditable Military Service
• Chapter 23, Service Credit Payments for Post-56 Military Service

The agency also has published a brochure on military deposits.

Your Questions

What if I don't qualify for Social Security at age 62?

In general, for employees who were first hired after Sept. 30, 1982, (this includes all FERS employees, unless they have a CSRS component), military service is not creditable unless a deposit is paid to CSRS or FERS. There are a couple of exceptions to this rule, so be sure to discuss your service with your HR office.

Employees not eligible for Social Security benefits at retirement receive full credit for their post-1956 military service without making a deposit. Employees who made a military deposit prior to retirement, retired prior to age 62 and are eligible for Social Security old-age benefits after retirement, continue to receive credit for the post-1956 military service after turning 62, however.

Employees who did not make the military deposit before retirement, retired before turning 62 and are eligible for Social Security at 62, have their annuities recomputed at 62 to eliminate credit for the post-1956 military service.

Employees who retired before turning 62 who are not eligible for Social Security at 62 continue to receive credit for post-1956 military service, even if they become entitled to Social Security at a later date and a military deposit was not made.

I assume the deposit I paid for military service will increase my CSRS service time. Correct?

The main reason to pay your military deposit is to credit the military service in the computation of your CSRS or FERS retirement benefit. Under CSRS, your military service is worth 2 percent of your high-three average salary for every year of service. Under FERS, the credit is 1 percent (1.1 percent if the employee retires at 62 or older with at least 20 years of service).

If you were hired before Oct. 1, 1982, your military service is credited for retirement eligibility, even if you don't pay for it -- but you might lose it in the computation if you are qualified for Social Security. If you were hired on or after Oct. 1, 1982, you must pay a military deposit to use the service toward eligibility and computation of your retirement.

After I retire from CSRS, should I work to earn one more credit of Social Security, or would it be useless because of the Windfall Elimination Provision?

If all you need is one more credit, then I would earn the $1,050 in wages required (in 2008) to gain one more credit of coverage. You will then be entitled to something, which is always better than nothing.

But remember, the reason for paying your military deposit is to protect your CSRS or FERS retirement benefit.

The WEP will reduce, but not eliminate, your Social Security retirement benefit if you receive a pension from work not covered by Social Security -- such as employment under CSRS.

Since I made the military deposit into CSRS for my active duty, can I also use it for Social Security, or is it lost?

Paying the post-1956 military service deposit will not have any affect on using the military service toward Social Security. You've paid Social Security taxes on your military pay after 1956, so you'll receive Social Security credit for your service. For more information, see this fact sheet from the Social Security Administration: Military Service and Social Security.

I was told that as a retired reservist I am entitled to two distinct and separate retirement funds -- one where I can elect to pay active-duty time/earnings into the civilian retirement fund; and another where I receive my military retirement at age 60 without any caveats. Is this true?

Yes. If you are retired under the provisions of 10 U.S.C. 12731-12739 (Chapter 1223), which grants retired pay to members of reserve components of the armed forces on the basis of age and service, you will not have to waive your military retired pay and you will be able to receive credit for your active duty under FERS or CSRS by making the proper military service payment.

Finally, there were several comments from employees who were wondering about the benefits of combining a military career with a civilian career to provide one retirement, as I described Jerry Westfall as doing in my column last week. This decision requires a permanent waiver of the military retirement as well as a substantial deposit into CSRS or FERS, so think carefully before you do it. I've written about this decision in a previous column: Mixing Military and Civilian Retirement (June 30, 2006). Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.